Metro uses profit margins to absorb food inflation and resists calls for higher wages

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Metro reported net income of $207.7 million for the quarter ended Dec. 18, an 8.6% increase from the same period a year earlier

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Metro Inc., which operates Canada’s third-largest grocery chain, posted a strong profit in the final months of 2021, dealing with staff illnesses and chaotic supply lines that led to shortages of products and the worst price increases in a decade.

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The Montreal-based company reported net income of $207.7 million for the quarter ended Dec. 18, an 8.6% increase over the same period a year earlier. Sales at Metro’s 1,600 supermarkets and pharmacies hit $4.3 billion, up 7.1% from pre-pandemic levels two years ago.

Metro’s results suggest the company’s scale is helping it weather some of the most turbulent conditions the food industry has faced in years. Terrible weather conditions in many major agricultural regions around the world, combined with ongoing supply bottlenecks related to COVID-19, pushed grocery prices up 5.7% in December compared to the previous year, the largest increase since 2011, Statistics Canada reported on January 19. .

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The latest wave of COVID-19 infections has also caused labor shortages across the economy, adding to the difficulty of sourcing ingredients, running factories at full capacity and to transport the goods. Anecdotal evidence suggests the system is strained, but Metro’s chief executive insisted his company was finding ways to keep stores properly stocked.

“There is food on our shelves,” Eric La Flèche told a virtual press conference after releasing his latest earnings report. “There’s definitely less variety than there should be, and we’re not as comprehensive as we’d like. But we are not short of food there.

There’s definitely less variety than there should be, and we’re not as comprehensive as we’d like. But we don’t run out of food there

Eric La Fleche

Metro’s results belie the narrative that runaway inflation is wreaking havoc on the economy in other ways: Earnings were higher in part because pandemic-related costs fell from 2020, when the company was spending big to keep the coronavirus out of its stores, and reward employees with pandemic bonuses. In fact, Metro is now using its profit cushion to absorb some of the higher costs for food producers, acting as a firewall between high wholesale prices and what consumers actually pay at the register, La Flèche said.

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“A company’s profitability is a function of sales, margins and expenses. I think we have controlled our expenses well,” said La Flèche. “On the margin side, I can tell you that our gross food margins are not necessarily up. In fact, we do not pass on all the cost increases we receive from our suppliers. »

A Metro spokesperson later confirmed that the reduction in COVID-19-related expenses included fewer costs related to in-store hospitality, which handled store traffic during peaks of the pandemic, as well as gift cards paid. to staff in the form of bonuses.

Grocery sales have surged through much of the pandemic, helped by public health restrictions on restaurants that often left consumers with little choice but to cook at home. But big grocers have also suffered serious reputational damage in the past two years, particularly in terms of the compensation of frontline workers in stores and distribution warehouses.

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During the latest wave of COVID-19 infections, worker groups pressured grocers to bring back the bonuses they paid during the first phase of the pandemic, typically $2 wage top-ups. $ per hour. Hero pay bonuses became a public relations victory for the industry in late winter and early spring 2020, but backfired when the three largest chains – Loblaw Companies Ltd., Sobeys parent Empire Co. Ltd., and Metro – canceled same-day bonuses in June 2020.

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Although Metro has not reinstated hourly bonuses, it has given staff a series of three gift cards at Metro stores. La Flèche took advantage of its latest earnings release to announce a fourth round of gift cards, worth $300 for full-time employees and up to $150 for part-time employees, to be distributed in February.

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“We are proud to do that,” he said. “We think it’s the right thing to do.”

Metro, which includes grocery banner Food Basics and drugstore chain Jean Coutu, also announced a quarterly dividend increase of 10% to 27.5 cents per share.

Unions have called the new gift card bonuses insufficient, given the widespread illness and exhaustion among their members. Jerry Dias – the national president of Unifor, which represents more than 8,000 subway workers – said the company’s profits this quarter are proof it could pay staff more.

“I’m totally disgusted by this thing,” he said. “They can’t reinstate the miserable $2 pandemic payout for workers who create wealth? What is wrong with the society we live in?

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They can’t reinstate the miserable $2 pandemic payout for wealth-creating workers?

jerry dias

Unifor, Canada’s largest private sector union, represents employees of the National Post newsroom in Toronto.

Teamsters spokesman Stephane Lacroix said permanent wage increases would be a more appropriate reward for frontline staff.

Job vacancies in Canada hit an all-time high in the third quarter of 2021, the latest period for which Statistics Canada data is available. Food and beverage stores were short by 24,635 workers, up 67% from the third quarter of 2019.

“Offering gift cards might seem like a good idea at first,” Lacroix said in an email, “but I think this industry should treat its workers better if it doesn’t want the labor shortage that’s hitting it.” ‘affects is getting worse.”

La Flèche said “nearly all” of its workforce is unionized and their compensation is governed by collective agreements.

“Whenever the negotiation is in place, we negotiate as best we can while remaining competitive in our industry,” he said. “We don’t operate in a vacuum. We operate against global players – most of them non-union by the way. And we offer, we think, good compensation with good benefits.

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